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About 5 years ago, I asked a politician about housing. The assemblyman told me that housing is largely controlled at the local level and driven by local city politics. He explained that voters tend to be home owners and property owners. The conundrum then is how to make housing affordable without impacting long term investment of majority of voters. A politician or city council which actually moved the needle on housing would be putting themselves at risk of losing many votes, and thus their political careers.

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This is the problem. Homes shouldn't be an investment. It should be a depreciating asset like cars at worst and a human right at best. Especially in a country as large as the US with so much resources, we shouldn't have turned homes into an investmens. Productive assets like companies should be investments.

But at this point, we are trapped. The largest retirement asset for most people are their homes. It's political suicide to do anything that would hurt the valuations of homes. If you are an older individual with your home making up a bulk of your retirement nest egg, you aren't going to vote for policies that make homes more affordable. And older folks vote more often and in larger numbers than younger voters.

I completely agree. It's not just retirement-age people either. I've noticed many Bay Area peers in their ~early 30s buy their first home and (understandably) swap camps from "very concerned about housing prices" to "happily watching their massive investment grow."

Is there any realistic path (even a very optimistic one) towards the Japanese model of house-as-depreciating-asset in the US?

Japan tears down their houses because they're worried about older houses being unsafe due to earthquake damage.

So I guess the most realistic path would be for the big one to hit California and destroy all the housing stock.

Realistic plan for what?

Also because they get moldy and stink from the humidity, and because many people believe they have ghosts.

The absolute quickest way to kill home value in Japan is have someone die in it. Absolutely nobody will want to live in the place and property owners will warn you before you consider looking at it.

If old people in the US saw their homes as a time-limited investment where they needed to sell them while they still can in order to ensure their spouse/kids have money, prices might drop. Maybe bringing back superstitions is a way millennials can finally take back the housing market.

I think I should move to Japan and buy cheap haunted houses.

> Is there any realistic path (even a very optimistic one) towards the Japanese model of house-as-depreciating-asset in the US?

One path toward that would be to eliminate property taxes. Governments want high housing costs because it increases property tax revenues. Take that off the table by generating the revenue some other way and it becomes a lot easier to pass policies to reduce housing costs. Meanwhile you throw the homeowners a bone, because even though their house isn't appreciating anymore, that's offset by all the property tax they no longer have to pay.

How do you fund all the programs currently funded by property tax? Not the least of which is local public education.

By using other taxes, like income tax or VAT. The point isn't inherently to change the amount of government revenue, only to shift where it comes from so that existing property owners don't revolt when they paid a certain amount for a property expecting it to appreciate and then it doesn't without anything to offset it.

I don't think that's true. Building more houses would also definitely increase property taxes, but the government is not doing that.

Currently, people are already spending a really big part of their incomes on rent, and hence property. It is not possible that they'll spend any more.

Building more houses increases property tax revenues, but it doesn't increase them per capita because now you have more people. The government's costs are per capita, so that doesn't help them.

By contrast, increasing property values generates more revenue per capita, so property tax gives the government a perverse incentive to increase housing costs.

> Homes shouldn't be an investment

Try explaining to somebody who just bought an asset that costs 10x their annual salary, at 5x leverage, that they shouldn't care whether this asset appreciates or not. Be prepared to duck quickly.

> Especially in a country as large as the US

I'm pretty sure there are places in US where housing is literally 20 times cheaper than Santa Cruz. Somehow it doesn't make anybody feel better.

Well, for those of us who live in those flyover states, it does make us feel a little better about our own situations, as well as mightily perplexed about what people in SF, etc, are thinking.

Where I live, a mid-sized metro in the central US, I had some graduate student coworkers recently outright buy a 1500 sqft 2-bedroom house within walking distance of our university for $30K (from foreclosure). Not the best area of town, but it was a perfectly fine house and you can't beat that price. Elsewhere, one can easily get a 2000-2500 sqft home with a sub-$1000 mortgage payment. And everything else, like food and gas, is much cheaper than CA, usually about half the price. And salaries, while lower, are still high enough for this to be a beneficial trade, not to mention the lower tax brackets from having a lower nominal income.

Now if you are pulling down $250K as a tech worker, of course it makes sense to live in the Bay Area. But all these housing insecure people working service jobs? They should come to the central US where they could have a much higher quality of life. And if they did, the housing crises in coastal metros would solve itself, because of decreased demand, and because the local authorities would be forced to make the cities livable for service workers -- assuming wealthier inhabitants want to have any Starbucks, bars, etc.

Another strange paradox is that zoning restrictions are much looser, and more sprawl is allowed in these mid-sized metros, than in places like Santa Cruz, despite the lower overall demand for housing. So there is a double-whammy effect causing a huge difference in housing prices between a few select cities and, well, everywhere else in the US.

> It's political suicide to do anything that would hurt the valuations of homes. If you are an older individual with your home making up a bulk of your retirement nest egg, you aren't going to vote for policies that make homes more affordable.

I hear this argument a lot, but it completely ignores the fact that development can allow more housing and continue to increase the value of existing housing.

The key is that more housing isn’t going to look like existing housing: it’s going to be condos and other apartments. Older folks in single-family homes are not going to see their houses lose value — if anything, the increase will continue, because now a developer can buy their house and turn it into four apartments.

Here’s how it would work: family buys single family home in year A for $100k. Lives there for a while, then sells in year B for $200k. The buyer is a developer, who then constructs a larger building on that same lot consisting of 4 apartments that now each sell for $100k again. Original family gains in wealth, developer makes tidy profit, new families can still buy a place to live for $100k. All numbers inflation-adjusted, you pick A and B to make whatever return you think is reasonable.

This is how densification happened almost everywhere until zoning laws spread mid-century.

Note what you don’t get out of this arrangement: a neighborhood that doesn’t change for 40 years; the ability to live in the same type of house your parents did, in the same neighborhood, for the same price. But you could have the same amount of (indoor) space they did, and outdoor space through public parks and the like.

What’s not sustainable is everyone having a suburban style detached single family home without increasing density in perpetuity.

The non-density alternative is sprawl, where prices rise in long-established neighborhoods, and outlying new developments are where you can buy new houses for less—which is what you observe all over California.

That only works if you have 4 new people who want to live there.

We could probably achieve that through immigration for a while, but there is still a sustainability problem that keeping some constraints on housing construction solves. I say this as someone who would love cheap housing in a desirable area.

Empty buildings tend to create problems, and the energy to tear them down/convert them to something else often isn't there once the population begins decreasing.

Most California cities are 40-70 years (years!) behind demand in housing production. There aren’t 4 people waiting for that development; there are 40.

The population of the US continues to grow. Empty buildings are not something you need to be concerned about when the current supply is so inadequate.

> That only works if you have 4 new people who want to live there.

I don't know about the rest of California, but in the bay area you can find those 4 people with your eyes closed.

There is affordable housing available all over the US even in California

People would rather live in the nice areas and that drives prices higher and then they complain about it.

> If you are an older individual with your home making up a bulk of your retirement nest egg, you aren't going to vote for policies that make homes more affordable.

The thing about this though: this only matters if you intend to sell your home and move to a completely different area before you die. Alternatively, you're willing to sell your home and stay in the same area, but move into a much smaller home (and/or ditch your single family home for a condo or apartment).

For some retirees, sure, that's their plan. But for those that just plan to stay in their home until they die, the home value really doesn't matter, since they're not going to realize that value in their lifetime.

The one counterargument to that I can think of is that a dropping home value would also drop the amount of money a retiree could extract via a reverse mortgage, but I'm not sure those are all that popular (but I could be wrong).

> housing affordable without impacting long term investment

Housing cannot both be 'affordable' and a 'good investment' - prices grow faster than inflation.

They can be. If the price only grows at inflation and the rent provides the actual return.

Housing cannot provide return only at inflation, that would mean nobody would want to invest in real estate.

Fair point, but that's a different model than "buy a house and watch its value skyrocket". It's more akin to what you'd find in a place like Germany, where you buy a second housing unit, rent it out, and it pays for itself over time and you can sell it off, even if it may not have appreciated in value a bunch.

>Housing cannot provide return only at inflation, that would mean nobody would want to invest in real estate.

Well sure, but that's sort of the point. Housing is, ultimately, a durable good. It's more like a car or a refrigerator than like a stock. It has use-value, but its only capital appreciation comes from charging ground-rent on access to nearby economic activity in which the housing itself doesn't participate.

Housing should not be a speculative investment on average. Houses are a durable consumer good.

Calling houses a durable consumer good is too one-dimensional. If I have a laundromat with 20 washing machines, that's far more useful located in NYC than in the middle of Kansas since there's far more people around to utilize the machines.

A huge part of the context of a house (and its value) is what it's located around.

Buying a house with the expectation of it doing anything other than housing you reliably as long as you maintain it is just a bad decision.

A huge part of what a house is located around is predicated on zoning laws that can change at any time.

A huge part of the business of booming areas is predicated on large business in the area. For instance: being an Amazon employee and living in Seattle makes buying a house unappealing. As far as 'investments' go, housing is not a stable proposition, doesn't help diversify against risk for the average use case, and doesn't promote tangible economic benefits that support its own appreciation.

Regardless -- durable goods are often more valuable in certain situations. That doesn't make it an investment to keep one that's more valuable and hold it.

If you're going to invest, at least treat it like a poor speculative investment

(Re-posting here, because too many people think this.) I hear this argument a lot, but it completely ignores the fact that development can allow more housing and continue to increase the value of existing housing.

This is how densification happened almost everywhere until zoning laws spread mid-century.

What’s not sustainable is everyone having a suburban style detached single family home without increasing density in perpetuity.

This is an excellent argument for local rezoning. The people who live in the place being rezoned for higher density do well.

But if housing costs go down, somebody has to be getting less money, and it's the people who live in the place that isn't rezoned. Because the people who move into those new condos are no longer bidding up the price of their existing houses.

Those people might still want to fight you. Though if they want money then what they should really be fighting for is to be the ones who get rezoned for higher density.

> But if housing costs go down, somebody has to be getting less money, and it's the people who live in the place that isn't rezone

I think you may have missed my point: housing costs go down, but the cost of existing established housing does not — what goes down is the cost of having, e.g., a 2-br unit in a neighborhood — specifically NOT the cost of an existing 2-br detached house, but of a 2-br condo newly built in that neighborhood, where that type of housing did not previously exist.

People are not making the decision to act in a “NIMBY” way for purely economic reasons — the “preserve the character of the neighborhood” is not a smokescreen for economic interests, it often really is a desire to preserve a way of life that seems incompatible with a 20-story tower plopped in the middle of it. (Ask me how I know!)

> Because the people who move into those new condos are no longer bidding up the price of their existing houses

The reality is that most of those people are just priced out, and not moving into the neighborhood — they’re not in a position to “bid up” the prices of the existing houses because they can’t afford it.

> housing costs go down, but the cost of existing established housing does not — what goes down is the cost of having, e.g., a 2-br unit in a neighborhood — specifically NOT the cost of an existing 2-br detached house, but of a 2-br condo newly built in that neighborhood, where that type of housing did not previously exist.

The argument for why existing housing goes up rather than down even though the housing supply is increasing is that a developer will pay you more so they can replace your house with condos. But that only applies to houses that are now zoned to allow them to be replaced with condos.

> The reality is that most of those people are just priced out, and not moving into the neighborhood — they’re not in a position to “bid up” the prices of the existing houses because they can’t afford it.

Priced out of what? Living indoors? They live somewhere now. Demand will be reduced there if supply is increased in the place they actually want to live and they move.

> But that only applies to houses that are now zoned to allow them to be replaced with condos.

Literally what I’m talking about and what is often fought against. But really any development constrain, zoning or not, has this effect.

And: Priced out of the whole area in many cases — folks are absolutely leaving NYC and the SF Bay Area for cheaper locales. Just ask anyone in the Central Valley, Portland, or Pittsburgh.

This is a good point, which I think you could boil down to "land [not housing] can be a good investment, and compatible with affordability if it a city is allowed to evolve and change".

It can be but not at the personal ownership level. Owning an apartment building or rentals can pay dividends - although that assumes sufficient demand but that goes for essentially every investment.

Preempt stupid locals and their dumb laws at the state level. The local politicians can say they did everything they could to stop it, housing gets built, and prices start to come down. This problem is not unique to the area. Idiotic nimbys need to be stopped but it's impossible if the fights have to happen at a local level, one municipality at a time. The interests of a few rich assholes shouldn't trample the interests of the entire area, its infrastructure, and housing supply.

Under SB50, people could convert their single family home to a four-unit condo complex. The value of such a structure is likely to be twice as much as a single family home (4 units at half the price of the original house). People don't oppose the growth to preserve their wealth - they oppose it to preserve their lifestyle.

Housing currently controlled at the local level by default, resulting in all those problems. Efforts to move things to the State level in California are ongoing and have hit or miss.

The problem is that since housing has been managed at the local level for so long, finding a coherent State level solution is hard and moreover, wealthy interests have influence at the state level also.

You're right; there's an ongoing recall process right now in the City Council, against people who voted for rent control measures.

Rent control won't help the striking grad students, though, since they are here for a short time. Rent control is for giving ownership-lite to people.

The only thing that helps graduate students is in the short term a COLA so they can survive, and in the longer term far far more housing so that there is enough to go around.

The prices are the symptom of the underlying problem. The price controlled stock in Santa Cruz is miniscule, and the lines so long that nobody who lives here less than a decade ever has a hope of getting a price-controlled unit.

Unless we address the shortage, we will have one of high prices, long lines, or lotteries. None of these are acceptable solutions for students. (Or really anyone, for that matter. We have to stop trying to exclude people and finally welcome them.)

That’s not true, and I can think of several examples where rent control would help grad students:

Grad students often live in Santa Cruz long term. I know multiple people in Santa Cruz who went back to school for higher degrees, and kept their same housing.

Even students who come from out of town still live there for the duration of their program, which can be 6 years. The rental market changes fast, and rent control for those 6 years would have an impact.

Many grad students live with other students, so the same lease can carry over as long as a leaseholder stays. I lived in one house that had kept the same lease going for over 15 years. That might get harder with rent control in place, but our rent was still comparatively cheap because we’d been there for so long.

Regardless of whether it helps grad students survive, it helps the people who live in Santa Cruz long term. I eventually left because I couldn’t afford to live and work there, and might not have had to make that choice if rent prices hadn’t gone through the roof.

I'm all for rent control, but we need to be realistic about what it solves, which is not much at all for grad students.

Already, even market rate housing has massive lines. Trying to grab anything off of Craig's List is nearly futile, as any new postings will overflow the lister's voicemail box.

Life in Santa Cruz is not like it was 10 years ago, it's far far more difficult to find housing, even with plentiful money.

Rent control, while a good thing that should define its be done, is not a solution to the problems of newcomers, and is not meant to help newcomers. It's meant to let people hold on, not fix the systemic problems with housing austerity.

Rent control is a short-term band-aid, and yet people seem to put it in place as a long-term solution. It's not. The long-term solution is to build more. Rent control just distorts the market, makes it hard for people to move if they want to, and makes non-rent-controlled units more expensive.

Rent control can help stop the bleeding while building catches up with demand, but it's ultimately a negative over the long term.

> The conundrum then is how to make housing affordable without impacting long term investment of majority of voters.

Speaking as a condo owner in a tech-heavy metro area: fuck my investment! My friends and family deserve to be able to afford to live places more than I deserve to make passive investment income from my own bedroom.

> The conundrum then is how to make housing affordable without impacting long term investment of majority of voters.

You can’t have both in the same place.

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